fac1503 accounting summaries study summary notes 2022 learning unit 8
fac1503 accounting summaries study summary notes 2022
fac1503 accounting summaries study summar
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FAC1503 STUDY
SUMMARY NOTES
2022 (learning
unit 8)
, Learning unit 8/2021
FINANCIAL ACCOUNTING PRINCIPLES FOR LAW PRACTITIONERS
LEARNING UNIT
8 CORRESPONDENTS
Contents
Learning outcomes ............................................................................................................................... 2
Key concepts ........................................................................................................................................ 2
Acronyms ............................................................................................................................................. 2
8.1 Introduction .................................................................................................................................. 3
8.2 Categories of instructions ............................................................................................................ 3
8.3 Types of costs incurred by clients from a legal practice ............................................................... 4
8.4 Flow of activities .......................................................................................................................... 6
8.5 General format of a correspondent account statement ................................................................ 7
8.6 Summary of steps in process..................................................................................................... 10
8.7 Recording of the correspondent account statement in the accounting records of the instructed
attorney ..................................................................................................................................... 11
8.8 Recording of the correspondent account statement in the accounting records of the instructed
attorney (including VAT) ............................................................................................................ 23
8.9 Recording of the correspondent account statement in the accounting records of the instructing
attorney ..................................................................................................................................... 28
8.10 Recording of the correspondent account statement in the accounting records of the instructing
attorney (including VAT) ............................................................................................................ 41
8.11 Self-assessment questions ........................................................................................................ 47
1
, Learning unit 8/2021
Learning outcomes
After studying this learning unit, you should be able to: 1
• define the term “correspondent”
• distinguish between the instructing and instructed correspondent
• prepare the instructed attorney’s correspondent account statement
• demonstrate an understanding of the correspondent allowance
• calculate the correspondent allowance
• calculate collection commission
• record all correspondent transactions in the accounting records of the instructing and
instructed correspondent
Acronyms
BCRJ Business cash receipts journal
BCPJ Business cash payments journal
CL Clients ledger
FJ Fees journal
GJ General journal
GL General ledger
LPA Legal Practice Act 28 of 2014
TB Trial balance
TJ Transfer journal
TCL Trust creditors ledger
TCRJ Trust cash receipts journal
TCPJ Trust cash payments journal
2
, Learning unit 8/2021
8.1 Introduction
Every attorney’s practice has to make use of the services of a correspondent at some point.
The reason being that in some instances the instruction from the client to the attorney can only
be executed in a jurisdiction where the attorney does not have an office. A law firm must be
within a 15km radius of the office of the registrar of the Court.
For example a client, E North, who resides in Mbombela, requests Mr Langa, an attorney, to
collect child maintenance money from her ex-husband in Midrand and to register a trust for her
children. As Mr Langa only has an office in Mbombela, he has to instruct SA Attorneys, an
attorneys firm in Midrand, to collect the money and register the trust. The attorney who gives
the instruction is known as the instructing attorney (the attorney, Mr Langa, in Mbombela in
the above example) and the attorney who receives the instruction and renders the service, is
known as the instructed attorney (the attorneys firm, SA Attorneys, in Midrand in the above
example).
8.2 Categories of instructions
The instructions given to the instructed attorney can be divided into two categories, namely:
• Instructions where no trust monies are involved.
Examples of this category are inter alia, the registration of patents and companies, the
settlement of divorce cases, the settlement of disputes and third-party claims.
• Instructions where trust monies are involved
Examples of this category are inter alia, the collection of debts and child maintenance.
It is important to distinguish between the two categories, as the entries in the accounting records
of both the instructed and the instructing attorneys differ for each category.
Notes
3
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